BlackBerry (BB 1.09%) was once synonymous with smartphones. Its enterprise-oriented devices accounted for over 20% of the fragmented market's shipments in 2007, according to Gartner.
But by 2016, the year BlackBerry finally stopped manufacturing its own devices and licensed its iconic brand to third-party smartphone makers, its market share had plunged to about 0%. Apple and Alphabet's Google had disrupted and split the market into a duopoly with their iPhones and Android devices, respectively, and BlackBerry was left out in the cold.
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Between the last trading days of 2007 and 2016, share prices of BlackBerry (known as Research in Motion until 2013) plunged 94%. At that point, many investors walked away and left the stock for dead. BlackBerry hasn't recouped most of those losses yet, but it also hasn't faded away -- and some contrarian investors believe it could still stage a long-term comeback.
Let's review the three key facts that well-informed investors likely know about BlackBerry, and how they might make its brand relevant again.
1. It's a cybersecurity company
BlackBerry's CEO John Chen, who took the helm in 2013, gradually phased out its dying smartphone business and focused on expanding its enterprise software and cybersecurity services with acquisitions.
BlackBerry acquired Good Technology, a mobile device management service provider, for $425 million in 2015. The following year, it bought the cybersecurity firm Cylance for $1.4 billion.
Between 2014 and 2016, BlackBerry also acquired the smaller cybersecurity firms Secusmart and Encription, the virtual SIM solutions firm Movirtu, the enterprise data management company WatchDox, and the crisis management platform AtHoc.
All those building blocks enabled it to launch Spark, a unified platform of security and data management software for enterprise customers, in 2018. It launched an expanded version, Spark Suites, in 2020.
BlackBerry generated 67% of its revenue from its cybersecurity business in the first nine months of fiscal 2022, compared to 54% of its revenue in the first nine months of fiscal 2021. That ongoing expansion might enable BlackBerry to benefit from the growth of the broader cybersecurity market, which could still grow at a compound annual growth rate (CAGR) of 13.4% between 2022 and 2027, according to Report Ocean.
2. It's an automotive software company
BlackBerry's other main growth engine is QNX, an embedded operating system it acquired from Harman for about $200 million in 2010. That acquisition turned out to be a smart move since QNX is now the most widely used embedded OS for connected and driverless vehicles.
QNX faces stiff competition from Android, Microsoft's Windows Embedded, and Linux, but its IVY partnership with Amazon Web Services (AWS) -- which was announced in late 2020 -- could make it the preferred embedded OS for automakers that want to tether their newest sensors and services to AWS. Therefore, it could still remain relevant in the automotive market even though it lost the mobile market to Apple and Google.
The softness of the automotive market over the past two years -- which was initially caused by the pandemic then exacerbated by the chip shortage and supply chain crisis -- has been throttling QNX's near-term growth. However, this business could still recover quickly after those headwinds pass.
3. It just sold most of its patents
As BlackBerry made the painful transition from hardware to software, it repeatedly leveraged its massive portfolio of mobile and messaging patents to generate fresh cash. It collected licensing fees from Chinese smartphone makers that wanted to use its brand, it sued companies for allegedly infringing on its mobile messaging features, and it even went after Ryan Seacrest for selling a smartphone case with a BlackBerry-style keyboard.
However, BlackBerry's licensing revenue plunged 77% year over year to just $52 million, or 10% of its top line, in the first nine months of fiscal 2022. It lost most of its patent infringement cases, including a high-profile one against Snap, and its closely watched settlement with Meta Platform's Facebook didn't bring in any significant revenue.
TCL, which previously manufactured BlackBerry-branded devices, also declined to renew its licensing partnership in 2020. Its new licensing partner, OnwardMobility, hasn't released a BlackBerry device yet.
That's why BlackBerry recently sold nearly all of its mobile, messaging, and wireless networking patents to Catapult IP Innovations for $600 million, which includes $400 million in cash and a $150 million promissory note.
That fresh injection of cash, which dwarfs its $271 million in cash and equivalents at the end of last November, could enable BlackBerry to make fresh investments in its core cybersecurity and IoT businesses.
It's still a work in progress
BlackBerry still faces a lot of near-term headwinds. Its cybersecurity revenue declined year over year in the first nine months of fiscal 2022 as it faced stiff competition from other cybersecurity companies, and soft auto sales continue to throttle QNX's growth. BlackBerry isn't doomed yet, but it will need to find fresh ways to grow again in this challenging market.
